The return of HMRC’s preferential status

Companies facing insolvency are now affected by the return of HMRC’s preferential status as a creditor, limiting their ability to negotiate a company voluntary arrangement (CVA).

If you own a business, invest in them or are a creditor to them, you may be aware that on 1 December HMRC became a preferential creditor for all company insolvencies. This means it will have the right to be paid before other creditors (such as providers of floating charge finance, suppliers and customers) but sits behind any preferential claims that employees may have in respect of arrears of wages (up to a limit of £800) and an unlimited amount for accrued holiday pay.

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HMRC service levels and compliance activity hit by Covid

Latest HMRC performance figures lay out the impact of Covid-19 during a unique financial year, resulting in ‘abnormally’ high debt levels, a sharp drop in tax receipts and a decline in customer service

An update on how the department has performed during the first three quarters of tax year 2020/21 indicate HMRC is currently holding £65bn of debt, around £45bn more than this time last year, while it estimates the debt balance at the end of March will be between £54bn and £70bn.

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Annual Investment Allowance £1m cap extended for a year

The Treasury has confirmed that the annual investment allowance (AIA), designed to stimulate investment in UK manufacturing, is to be extended further for an additional year in a bid to counter the current downturn in activity.

The AIA provides a tax write off against profits for expenditure incurred on plant and machinery by businesses and owners of commercial property.

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New lockdown grants to support businesses


Businesses in the retail, hospitality and leisure sectors are to receive a one-off top-up grant worth up to £9000 to help them through to the Spring, Chancellor Rishi Sunak has announced.

The latest announcement comes in addition to £1.1 billion further discretionary grant funding for local authorities, Local Restriction Support Grants worth up to £3000 a month and extension of the furlough scheme.

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Self assessment deadline - 31 January 2021

Each year, around 11m people complete a self assessment tax return. You can complete your 2019-20 tax return at any time up to the deadline but HMRC recommends (and we agree) completing it early to allow time to pay the tax bill or set up a payment plan. 

You must complete a self assessment return if you:

  • have earned more than £2,500 from renting out property;
  • have received, or their partner has received, Child Benefit and either of them had an annual income of more than £50,000;
  • have received more than £2,500 in other untaxed income, for example from tips or commission;
  • are a self-employed sole trader whose annual turnover is over £1,000;
  • are an employee claiming expenses in excess of £2,500;
  • have an annual income of over £100,000; or
  • have earned income from abroad that they need to pay tax on.

HMRC’s interim director general of customer services Karl Khan said: ‘HMRC is determined to help people during this difficult time. We know many will have been adversely affected by the coronavirus pandemic, or will need help to spread the cost of their tax bill.

‘That’s why we’ve made it quick and simple to set up a payment plan to spread the costs and help people get back on their feet. It’s easy to do online and there’s no need to call us to set it up.’

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Numerico Chartered Certified Accountants is accredited by the ACCA, which means we are wholly composed of Chartered Certified Accountants and covered by ACCA’s Group Consumer Credit Licence under the terms of the Consumer Credit Act 1974.



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